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Intel Benefits from Cloud Computing, Explosion in Mobile Devices

The shift to cloud computing is fueling strong growth in Intel's enterprise server business as the company gears up to play in the tablet and smartphone segment.

Despite a challenging first quarter and weakening consumer demand, strong business spending and emerging markets are driving demand for Intel's traditional businesses. Company executives are expecting the momentum to continue for the rest of 2011 as the company strengthens its presence in the mobile device segment.

During an April 19 conference call with analysts and journalists announcing the chip maker's record first-quarter numbers, Intel CEO Paul Otellini said the shift of critical business applications to the cloud drove IT business spending. "Cloud build out" drove demand for high-end servers, storage and networking products for big centralized data centers.

Intel had a record first quarter that kicked off a strong start to 2011, thanks to continued strong enterprise sales despite a softening in consumer markets in the United States and Western Europe. In the first quarter, revenue came in at $12.9 billion-up 25 percent over the same period in 2010-with net income hitting $3.3 billion, a 34 percent jump.

Intel continued its strong performance from the end of 2010, as revenue and net income were up 12 percent and 3 percent, respectively, compared with fourth-quarter 2010 results.

Further reading

Intel is taking advantage of the explosion of devices that can connect to the Internet. "We not only participate through selling our products into these device categories, but we also profit from the wide array of products that we sell in the build out of the data center capacity required to serve all of these devices," Otellini said.

The data center group saw quarterly revenue rising 45 percent over the fourth-quarter 2010 and 65 percent from first-quarter 2010. Otellini said the group is expected to reach $10 billion in revenues for 2011.

Despite initial problems with the Cougar Point chipset, Intel appears to have recovered nicely, reporting strong demand for its Sandy Bridge processors. A technical error in the chipset led Intel to issue a product recall, fix the problems and then reissue the product. Intel recovered from the setback faster than the company expected in January, according to company executives.

Calling early demand for Sandy Bridge "outstanding," Otellini projected the ramp to continue on a very sharp growth trajectory for the rest of the year, with unit shipments expected to "more than double" from the first quarter to second quarter. "I believe that this is the very best product Intel has ever delivered to our customers," Otellini said.